Scandals of selective reporting of clinical trial results by pharmaceutical firms have underlined the need for more transparency in clinical trials. We provide a theoretical framework
which reproduces incentives for selective reporting and yields three key implications concerning regulation. First, a compulsory clinical trial registry complemented through a voluntary
clinical trial results database can implement full transparency (the existence of all trials as
well as their results is known). Second, full transparency comes at a price. It has a deterrence
effect on the incentives to conduct clinical trials, as it reduces the firms'gains from trials.
Third, in principle, a voluntary clinical trial results database without a compulsory registry
is a superior regulatory tool; but we provide some qualified support for additional compulsory registries when medical decision-makers cannot anticipate correctly the drug companies'
decisions whether to conduct trials.
Keywords: pharmaceutical firms, strategic information transmission, clinical trials, registries, results databases, scientific knowledge
JEL classification: D72, I18, L15